Correlation Between Allstate and W R

Can any of the company-specific risk be diversified away by investing in both Allstate and W R at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Allstate and W R into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Allstate and W R Berkley, you can compare the effects of market volatilities on Allstate and W R and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Allstate with a short position of W R. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allstate and W R.

Diversification Opportunities for Allstate and W R

-0.33

Correlation Coefficient

Allstate  W R

Very good diversification

The 3 months correlation between Allstate and WRB-PE is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding The Allstate and W R Berkley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on W R Berkley and Allstate is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on The Allstate are associated (or correlated) with W R. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of W R Berkley has no effect on the direction of Allstate i.e., Allstate and W R go up and down completely randomly.

Pair Corralation between Allstate and W R

Assuming the 90 days trading horizon The Allstate is expected to generate 0.6 times more return on investment than W R. However, The Allstate is 1.66 times less risky than W R. It trades about 0.11 of its potential returns per unit of risk. W R Berkley is currently generating about -0.09 per unit of risk. If you would invest  2,562  in The Allstate on September 20, 2024 and sell it today you would earn a total of  58.00  from holding The Allstate or generate 2.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

The Allstate  vs.  W R Berkley

Allstate

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Allstate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Allstate is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

W R Berkley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days W R Berkley has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, W R is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Allstate and W R

The main advantage of trading using opposite Allstate and W R positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allstate position performs unexpectedly, W R can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in W R will offset losses from the drop in W R's long position.

The idea behind The Allstate and W R Berkley pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..